My business has a flat tyre
The importance of acknowledging the moments we don't want to celebrate in business.
Business isn’t all grind and then a big win (unless you exit with a big payout). In fact there are still bumps along the way and right now I’m going through a big bump.
My monthly revenue is only just covering my business expenses and there isn’t enough left to pay me or cover the costs of running our family home.
I’m obviously worried right now BUT I’m also excited in a weird sort of way.
The situation
I’ve gone from a monthly revenue of around $25-30k and am now hovering between $10-$14k (closer to $10k). The monthly expenses are around $10k and my family living costs are around $10k.
So as you can see there is not enough coming in AND the costs of running the business are too high.
I have around 3 months worth of cash so that means around 3 months to make a serious course correction equivalent to an additional $10k per month.
Why we’re in this situation
I think there are a combination of reasons that we are in this situation:
I decided to no longer offer standalone courses for sale so that I could focus solely on promoting my subscription product
I lowered my prices (including for current students)
I stopped using artificial discounts to drive sales
I stopped running promotions every month
Over the longer term I’ve made more of a push towards annual subscriptions rather than monthly which leaves me with less consistent monthly revenue
Over the last five years I’ve been less frugal in how I run the business due to having good cashflow AND trying to make life easier with a young family (no regrets here)
The macro-economic climate. I’m putting this one last because I don’t believe it is the most important factor. Plus, it isn’t in my control. So, we’ll just say that the dollar is weaker and the public’s confidence is low at the moment.
There might be other factors and decisions that I’ve made which have led to this situation but I think these are the main ones.
Clarity.
The most important thing to realise first of all is that I have one priority. Create an extra $10k per month so that I can at least pay myself.
This kind of clarity is great. It’s a little like when you get a flat tyre during a long journey. You only have one thing that needs to be done so that you can get back on the road - fix that damned tyre.
How can I do this?
Option 1 - Reduce Expenses
Like I said before, I don’t run the business anywhere as lean as I did during the early years. So much so that I haven’t even been measuring my expenses in any serious way. Running an online business can be very high margin but mine is not currently. A lot of that is down to high staff costs ($5-6k per month) and being happy spending money on equipment, software products and anything else that will a) make running the business easier and b) make it more fun. So, my first step at the very least is to be more careful with any extra monthly expenses such as new software and equipment. The biggest saving could be staff costs but they are also the reason that I don’t have to work 80 hours per week and never see my children. Losing the team would be a last resort and would require dramatic and painful changes to my product. It’s an option but not the best one.
I’m going to try to keep expenses to $7k or less AND maybe slowly move towards a model where I am less reliant on people doing certain jobs.
Option 2 - New Revenue Streams
I love having a simple business model and have always loved companies that sell one product only. I feel like this creates a level of clarity and focus which can lead to an excellent product. However, I need to find an extra $10k each month so I sat down and wrote out 12 new potential revenue streams.
They broadly fall into the following categories;
Low resource - lower return
High Resource - potentially high return
I’m fixing a flat tyre so I need to put aside the “High Resource” category and focus on the “Low Resource” categories. I don’t think any one of the potential revenue streams will get me to my monthly target immediately but I think the aggregate of a handful of them might. Then once I’m in a more stable position I can move on to the longer term/more resource intensive (potentially higher reward) projects.
Option 3 - Do what used to work
I have been running this particular business for over 10 years so I know what has worked historically.
Standalone courses have been a good cash generator AND discount marketing has driven more sales.
While I don’t want to use these tactics longer term I think I have to suck it up and use them for now until we get back to stability.
Immediately, I’ll can sell pre-existing courses AND further down the line I can create new ones.
Option 4 - Offering my current members more
I’ve never been particularly good at trying to sell more to my current members. I always have the fear of coming off as overly commercial.
BUT, I’ve asked them what extra features/services they want and I will see how I can provide them and make some more recurring revenue from the current group.
This is maybe the easiest option to explore because my members already know, like and trust me AND I can ask them for exactly what they want. The potential downside is that they want more access to me which then means spending more time working and therefore less time with my family.
What I’m going to try fist
I’m going to try a combination of the above.
Reduce Expenses - Over the next month I will still maintain the team I have but I will run leaner. I.e. No new software subscriptions, no paying for training and no new equipment.
Doing what used to work - I don’t want to use fake discounts so I will keep those in my back pocket for now. Long term, I don’t want to sell standalone courses BUT for now I will do that again.
Offering my current members more - I surveyed my current members to see what they would pay more to get access to. I will start offering the version of this that looks like the most value for them while being the lowest resource drain for me.
Final thoughts
I think it is important to keep a record of the tougher times in business. This is definitely one of the tougher times I’ve had.
I’m excited about the singular focus I have BUT I don’t want to go back to a 20 something’s mindset of working harder and hustling my way out of this situation. I want to keep lean and value my time with my family as the most important thing at the moment.